Republicans Battle To Push Medical Device Tax Repeal

WASHINGTON (AP) - Republicans shrugged off a veto threat and began pushing legislation through the House on Thursday that would repeal a tax on companies that produce many medical devices sold in the United States.

Passage was assured because more than half of the 435-member House was sponsoring the measure. Republicans assailing the tax as a job-killer received support from some Democrats representing states where medical equipment makers have a heavy presence, including Minnesota, Pennsylvania and Massachusetts.

The 2.3 percent tax, set to take effect in January, is aimed at makers of equipment such as X-ray machines and replacement hips that is sold in the U.S. and used chiefly by doctors and hospitals. It does not apply to consumer goods such as bandages and hearing aids. The tax is projected to bring in $29 billion over the next decade for the government.

"Why in the world would we want to take another $29 billion worth of innovations out of our future and out of our health care industry and put it in the hands of this government?" said Rep. Tim Scott, R-S.C.

The measure's prospects are grim in the Senate, where Democratic leaders do not plan to bring it up.

The tax was enacted in 2010 as part of President Barack Obama's health care overhaul. It is intended to help pay for that law's expansion of insurance coverage. Democrats said the GOP effort to rescind the tax was another attempt to weaken and kill the law, which Republicans oppose, and said GOP claims that the tax would kill jobs were exaggerated.

"Here we are again with another bill to repeal the Affordable Care Act," said Rep. Jared Polis, D-Colo., using the health care law's formal name.

Since the law's enactment, the GOP-led House has voted numerous times to cut some subsidies for patients, trim financing for a preventive health fund and make other reductions in the statute's scope, including some measures that have been signed by Obama.

Device manufacturers want to kill the tax before it kicks in. On Wednesday, more than 700 associations and companies, including AdvaMed and the Medical Device Manufacturers Association, the industry's chief trade groups, wrote to House leaders urging them to erase the tax.

"If this tax is not repealed, it will continue to force affected companies to consider cutting manufacturing operations, research and development, and employment levels to recoup the lost earnings due to the tax," they wrote.

The U.S. Chamber of Commerce said the tax would "lead to increased health care costs, undercutting one of the primary goals of health care reform."

The medical device industry employs around 400,000 people in the U.S. and has annual sales of around $130 billion.

In their letter threatening a veto, White House officials said the health care law would give the medical device industry 30 million new potential customers who will gain health insurance. Industry officials deny that, saying the elderly patients who use many of their products are already covered by Medicare.

The legislation has been combined with two other provisions. One would let people recover up to $500 from their tax-favored health flexible spending accounts if they don't use all the money for medical bills. They currently lose any unspent funds in such accounts.

The other would let people use money from some tax-advantaged health savings accounts for over-the-counter drugs.

The overall bill would cost $37 billion over 10 years.

It would be more than paid for by eliminating limits on the money the government could recover if it gives lower-earning people subsidies for buying health insurance that are higher than they qualify for. When that part of the health care law takes effect in two years, the subsidies will be paid in advance and the government estimates it will end up making billions of dollars in overpayments.

That provision would save a projected $44 billion for the government over the decade, meaning that overall the legislation would save $7 billion. White House officials say removing the limits on the subsidies the government recovers is essentially a tax increase and that it would discourage people from signing up for coverage.

In its letter, White House officials wrote that the bill "would fund tax breaks for industry by raising taxes on middle-class and low-income families."